Senate floor leader proposes tax break to soften minimum wage increase

The Associated Press

SANTA FE — A top Democratic leader in the Senate is proposing a tax credit to help small businesses cope with the costs of paying their workers a higher minimum wage.

Senate Majority Leader Michael Sanchez, D-Belen, introduced a measure Wednesday to raise the minimum wage from $5.15 to $7.50 an hour starting next year. But the proposal by Sanchez differs from other wage bills in the Legislature because it proposes a tax credit over three years to allow businesses — those with 25 or fewer employees — to offset part of their expenses of raising worker wages to $7.50 an hour.

Sanchez said the current minimum wage rate was “unconscionable” and “people can’t live off of $5.15 an hour.”

He said his proposal could make a wage increase more acceptable to businesses, which worry that it will drive up expenses and make their goods or services less competitive.

“This to me seemed to be a reasonable approach to try to help businesses and not hurt businesses,” said Sanchez.
The proposal by Sanchez is among several competing bills to boost the state’s hourly minimum wage to $7.50.

Gov. Bill Richardson proposes phasing in an increase over three years. House Speaker Ben Lujan is sponsoring a bill to raise the wage floor to $7.50 in one step — effective in 2007 — but also require yearly inflationary adjustments of the minimum wage.

The proposal by Sanchez doesn’t provide for inflation indexing.

Sanchez said he expected the Legislature to approve a higher minimum wage and it’s possible that a compromise proposal might include elements from all the competing proposals.

According to a preliminary estimate, the proposed tax credit could cost the state up to $30 million in lost revenues. Initially, eligible businesses could get a credit for 40 percent of the amounts they paid to boost worker wages to $7.50 an hour. That would drop to 30 percent and then 20 percent. The credit could be claimed against the amount of some taxes owed by the business, including gross receipts and withholding taxes.